In Monero Valley, California, the construction of a new Sketchers Distribution Center caused mechanics lien havoc. The massive 1.8 million square foot distribution center made a news splash when its general contractor bailed on the project, leaving a lot of subcontractors and suppliers unpaid. According to some news stories, this resulted in more than 73 separate mechanic liens worth more than $6.7 million.

It’s all water under the bridge now, as the project was bonded by LiberyMutual / Safeco, and all of the lien claims have been paid. Additionally, the building found a new general contractor and is now freshly completed.

What happened in Moreno Valley with the Sketchers facility, however, is a great story that demonstrates why mechanic lien claims are filed on projects, and how they often are handled to get contractors and suppliers paid.

In fact, Kimberly Pierceall (@pierceall) of The Press Enterprise (PE.com) wrote one of the best news pieces on mechanics lien claims I’ve ever read. [pullquote style=”right” quote=”dark”]In fact, Kimberly Pierceall (@pierceall) of The Press Enterprise (PE.com) wrote one of the best news pieces on mechanics lien claims I’ve ever read.[/pullquote] It inspired me to write this blog posts simply to link to the article, because I think my readers would really enjoy it and would learn a lot about the big picture of mechanics lien filings. The Sketchers project is a mega-project, and it confronted something that mega-projects sometimes confront: general contractors going underwater.

We saw this happen on a mega-project in Las Vegas, where over $500 million of mechanics liens were filed on the $8.5 billion City Center project. When these things happen, money doesn’t trickle down to the subs and suppliers, and they must file a mechanics lien to preserve their right to get paid. If they don’t file the mechanics’ lien, they can only proceed against the general contractor. Of course, that will go no where in these circumstances.

Ms. Pierceall’s articles, “Liens on Skechers Project Mount,” does a great job of explaining the ramifications of a general contractor going bankrupt, as well as how mechanics lien claims are impacted by performance and payment bonds. It’s worth a read.

About Scott Wolfe Jr

Scott Wolfe Jr. is the CEO of zlien, a company that provides software and services to help building material supply and construction companies reduce their credit risk and default receivables through the management of mechanics lien and bond claim compliance. He is also the founding author of the Construction Finance Journal, a leading online publication about liens, security instruments and getting paid on every account. Scott is a licensed attorney in six states with extensive experience in corporate credit management and collections law, with a specific emphasis on utilizing mechanic liens, UCC filings and other security instruments to protect and manage receivables. You can connect with him via Twitter,LinkedIn and Google+.